Online Gambling in the US

by James Carter on January 5th, 2016

Real-Money Wagering in the U.S.A.Gambling is a popular activity in the United States. While roots of games like poker are often debated, Americans have embraced gambling games like their own, and the result is, for example, about $92 billion worth of revenue in 2012.

But what about playing online in the US? Is it legal to gamble for real money? Where to play? How to deposit and cashout money? We'll do our best to answer these questions below.

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Is It Legal to Gamble Online in the US?

Only three states have legal, licensed and regulated online gambling: Delaware, Nevada and New Jersey. Some other locations may follow suit. California is the big one everyone's waiting for with its ~39 million residents, but the state is ruled out for the immediate future. Some states ban almost all forms of gambling outright - in Hawaii, for example, a home poker game where only players can make money is the only legal form of gambling.

To participate in legalized US online gambling, you must be physically present in one of three states mentioned above. For example, an American citizen in Texas cannot register a real money casino gambling account at one of the online casinos in New Jersey. (States are strict about this which has lead to geolocation issues, meaning even some people inside a state's boundaries find themselves unable to play, but that's a story for another day.)

Similarly, only casinos that operate within those states can apply for a license. There can be partnerships between brick & mortar casinos and existing online gambling operators (as a software-licensing arrangement), though, such as Borgata & Party Poker, and Caesar's Interactive & 888.com. One could argue that this is beneficial to both parties since established online operators have lots of experience and brand recognition to bring to the table. It's also the only way for online operators to get into the US market.

Companies that continued to offer online gambling games to US citizens after December 2006 (the same year the Unlawful Internet Gaming Enforcement Act became a law) are, at least for now, unable to enter Nevada as a legalized operator due to a "bad actor" clause.

In addition to licensed operators in Delaware, Nevada and New Jersey, some offshore gambling operators accept real-money players from other parts of the US (BetOnline, in fact, from all 50 states), risking fines and possible prosecution in the process. These sites operate from jurisdictions outside of the United States, such as the Mohawk Territory of Kahnawake, Antiqua & Barbuda, Panama and Costa Rica.

To our knowledge, no one in the U.S. has ever been convicted or arrested for gambling on the Internet (it's difficult to find sources to confirm this from the past year or so but here's an older one). Enforcement action has been limited to operators, such as in the case of United States v. Scheinberg, or payment processors, such as in the case of Neteller. So far, the government has seemed far more interested in what gambling operators and payment processors are doing than what gamblers are doing but that, of course, might change.

Federal Laws vs. State Laws

There's no federal law that makes it illegal to gamble online. With that said, there's no federal law that legalizes online gambling either, and each state gets to set its own gambling laws. In many cases, state gambling laws indirectly prohibit online gambling by making everything not classified "lawful" - well, "unlawful." State gambling laws rarely address internet gambling directly (there are exceptions, such as the state of Washington and the three states mentioned above).

The Law & USA Online Betting

The Wire Act of 1961 outlawed interstate sports betting. It did not address other kinds of gambling, although at one time, the U.S. Department of Justice contended that it also applied to any kind of Internet gambling activity. They have since changed that opinion.

For an excellent explanation on how the Wire Act affects online gambling, I recommend reading The Original Intent of the Wire Act and Its Implications for State-based Legalization of Internet Gambling by Michelle Minton.

Casino mogul Sheldon Adelson is spending a lot of resources on the Restore America's Wire Act (RAWA) legislation which would make online poker illegal on a federal level. Nolan Dalla has written a fantastic article about RAWA and why we should take it seriously.

Where to Play?

In Delaware, Nevada and New Jersey, there are legal, regulated and licensed options that certainly seem safer than any offshore operations. Even if you didn't consider the legal aspect - which, of course, is a very real consideration - offshore gambling sites are, by definition, operating in some other jurisdiction and there's little you can do if they refuse to pay your winnings (here are some horror stories). So first, let me explain which options are available if you're physically located within any of those three states:

New Jersey

The Garden State's online gambling market has shown the most promise out of the three states so far, undoubtedly due to its population of about nine million, which is significantly more than in Nevada and Delaware. In December 2014, combined internet gaming win for operators in New Jersey was $10.7 million--just about what Governor Christie was hoping to make in taxes. So while a respectable figure, it's telling that by the fifth month of operations being up and running, revenue growth had already taken a step backwards.

Licensed Sites in New Jersey:

  • Borgata Poker (Borgata Hotel Casino & Spa)
  • Borgata Casino (Borgata Hotel Casino & Spa)
  • NJ.PartyPoker (Borgata Hotel Casino & Spa)
  • Pala Casino (Borgata Hotel Casino & Spa)
  • Harrah's Casino (Caesar's Interactive Entertainment)
  • WSOP.com (Caesar's Interactive Entertainment)
  • 888.com (Caesar's Interactive Entertainment)
  • Caesar's Casino (Caesar's Interactive Entertainment)
  • Golden Nugget Casino (Golden Nugget Atlantic City)
  • Betfair Casino (Golden Nugget Atlantic City)
  • Tropicana Casino (Tropicana Casino and Resort)
  • Virgin Casino (Tropicana Casino and Resort)

Find the official list of licensed online gaming companies in New Jersey here.

Nevada

Nevada was the first state to legalize real-money online gambling in the US. Their revenues have been lower than expected ($641,000 in November 2014), and they only operate online poker games, but the state has agreed to combine online poker player pools with Delaware, giving players a wider selection of opponents to play against, and thus hopefully creating more action at the tables.

Licensed Sites in Nevada:

In November 2014, Ultimate Gaming, which operated one of Nevada's three online poker sites called Ultimate Poker, announced it was shutting down, citing reasons such as "online poker revenues in Nevada have fallen far short of original projections," and "the state-by-state approach to online gaming has created an extremely cost-prohibitive and challenging operating environment."

Delaware

The smallest of the three (with population at roughly 920,000), Delaware has attracted fewer brands than the other states and is struggling to make any significant amount of profit. Since online poker economy needs a large player base to keep games running around the clock, Delaware joined forces with Nevada and created a combined pool of poker players.

Licensed Sites in Delaware:

  • Delaware Park Racetrack & Slots
  • Dover Downs
  • Harrington Raceway & Casino

Rest of the US / Offshore Sites

Unless you're physically located inside the three states above, you have no licensed sites to play at. Your only options are gambling sites that operate outside of the US and against the will of the US government. Most offshore sites have, indeed, stopped accepting US customers, and there are numerous examples of offshore sites that have scammed players, but there are also US-accepting sites with strong track records, such as:

It's your responsibility to find out if playing online gambling games is legal (or not) where you live. Again, these sites haven't been licensed to operate in the US, and are operating in other jurisdictions to avoid the US government. The safer option is to play at licensed US sites if you happen to be located in Delaware, Nevada or New Jersey.

That's not to say there wouldn't be some benefits to a) playing at offshore sites, or b) operating sites in other jurisdictions. For example, licensed sites require lots of personal information and some of us are uncomfortable with giving more personal information than is absolutely necessary to any kind of business, so the sign-up process at offshore sites is simpler and less intrusive.

On the operator side, offshore sites are dealing with different kinds of regulations and limits. And finally, offshore sites accept customers from around the US (and in some cases around the world) while licensed sites are limited to accepting customers from within their respective states, allowing offshore sites to create larger player pools.

It's also worth keeping in mind that getting paid by an offshore site can be difficult (like it was with Full Tilt Poker). If an offshore site disappears from the face of the earth with your money, there's virtually nothing you can do about it.

Deposit Methods

The amount of deposit options decreased greatly for American online gamblers looking to play at offshore sites because of the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006. While the UIGEA does not outlaw gambling, it "prohibits gambling businesses from knowingly accepting payments in connection with the participation of another person in a bet or wager that involves the use of the internet and that is unlawful under any federal state or law."

The result? Some of the biggest online gambling operators, such as PartyGaming and bWin (which, co-incidentally, have since mergered) left the US market, and so did a variety of payment operators such as Neteller and Moneybookers. These bigger, popular e-wallets have since returned to licensed and regulated US internet gambling markets, but only to them.

In fact, licensed US online gambling websites offer plenty of reliable and convenient payment methods, such as Visa, Mastercard, American Express, Neteller, Skrill, bank transfers (ACH), online banking transfers, PayNearMe and cash that can be deposited and withdrawn at a brick & mortar casino's cashier cage.

But while US gamblers in Delaware, Nevada and New Jersey have plenty of deposit and withdrawal options to choose from, Americans looking to play at offshore sites mainly have three. Still, plenty of US citizens find ways to transfer money to and from US online gambling sites, and here are the common ways of doing so:

Credit Cards

Credit, debit and gift card deposits are available at most US gambling sites (with the exception of sites that only accept virtual currency). Based on our experience on keeping track of the industry, Visa seems to be the most widely accepted, Mastercard as a close second and American Express as a distant third. This site did some research on the subject to find out how often deposits go through, and they seem to be around 60-70%.

Card deposits are unsuccessful at times because credit card companies and issuers decline gambling transactions - if they can be identified as gambling transactions, that is. The transactions that go through have likely been masked so that banking institutions are unable to detect what the money is being used for.

The main reason for banking institutions to decline online gambling credit card transfers is the fear of being punished under the UIGEA. Once you also consider that gambling debts don't always hold up in court - which means a customer could use funds for a sportsbook and later sue to get them back - it's even easier to understand their decision to so. To have any chance of a successful card deposit, your card must be eligible for online and international purchases.

Generally, the only way to cashout after making a card deposit is by requesting a check.

Money Transfer Services

Services such as Western Union and MoneyGram allow the customer to send cash directly to the casino, sportsbook or poker room of their choice. This way of transferring money to and from gambling websites usually costs more than using cards, and is slower, but money transfer withdrawals are generally faster than check withdrawals, and you don't have to wonder whether your card will work or not.

I've followed a couple of the most popular poker, casino and betting site forums closely. It seems like the use of money transfer services is on the rise as card deposits are being less and less successful, but I have no statistics to prove this. Either way, you can essentially use your credit card (the very same that might have been declined at a gambling website!) to deposit to your Western Union or Moneygram account online, and then transfer money to a gambling site through that account, so using these services is fairly convenient.

Bank Wire

In rare instances (and offshore US gaming sites rarely advertise this option), you're allowed to move money to and from the site via bank wire.